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Cisco: Don't Be Surprised At Verizon Optical Deal

Dan O'Shea
4/7/2015

Nobody should be surprised that Verizon tapped Cisco for its coveted metro 100G contract, the vendor's top optical executive said this week. But he's not surprised by the surprise.

Cisco had a "very deep interaction" with Verizon Communications Inc. (NYSE: VZ), working closely with the carrier for two years before the contract award, said Bill Gartner, vice president and general manager of Cisco Systems Inc. (Nasdaq: CSCO)'s optical systems and transceiver group during a Tech Talk conference call event hosted by UBS Securities this week.

Verizon had a lot of input into development of the Cisco NCS 4000 platform the carrier ultimately bought, Gartner said. (See Cisco Scores 'Shocking' 100G Metro Deal at Verizon.)

Cisco also has a long-standing supplier relationship with Verizon for other products, Gartner said in a one-on-one follow-up conversation with Light Reading after the call. (See VZ Taps Cisco for SMB Routers and Verizon, Tata Push Telepresence Ties.)

"I'm not terribly surprised by the industry reaction to our Verizon deal because Cisco doesn't often wave the flag on optical," Gartner told Light Reading. "But they are not strangers to us, and we're not strangers to them. I do get defensive when people say they didn't know Cisco had an optical business."

One of the things that might surprise people about Cisco winning a spot with Verizon as an optical supplier is that that carrier already has ongoing supply relationships with four other optical vendors -- Ciena Corp. (NYSE: CIEN), Alcatel-Lucent (NYSE: ALU), Coriant and Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY). "It was fair to ask, with four incumbent vendors, if they needed a fifth," Gartner admitted.

Gartner further admitted that if the metro decision just came down to a "product beauty contest," Cisco might not have earned that fifth spot. "If it was a pure product foot race -- who has the best 100G -- we might not have survived because those kinds of deliberations always seem to favor the incumbent vendors even if they don't have the best products."

Heavy Reading senior analyst Sterling Perrin, one of the observers who called Cisco's Verizon metro win a "shock," recently wrote in a research note to clients that Glenn Wellbrock, director of optical transport planning at Verizon, told him that the three differentiators that helped set Cisco apart from competitors were time to market, capabilities and price, in that order. Cisco's packet-optical integrated NCS 4000, which has been available since early 2014, preceded similar products in the market, such as Ciena's 8700 platform (although it's Ciena's long-standing 6500 platform that is sharing Verizon's metro network deployment with Cisco's NCS 4000.) (See Ciena Stirs Up the Metro Market.)

Gartner reiterated that Cisco did not just discount its way into the relationship. "Price was one of the factors, but not the only factor," he said. "We invested a lot in trying to find out what problems they faced, and didn't just try to sell them a box."

Gartner also said Cisco's status as a large, financially stable vendor that could support Verizon's ongoing needs had something to do with its win, as well as Cisco's ability to support Verizon TDM to IP transition with circuit emulation capabilities and its perspective on packet-optical integration.


Want to know more about the networking moves of web giants? It's sure to be a hot topic at Light Reading's second Big Telecom Event on June 9-10 in Chicago. Get yourself registered today or get left behind!


The Verizon deal comes less than a year after Gartner, who already led Cisco's optical systems efforts, added responsibility over the company's optical transceivers group following the departure of former transceivers lead Adam Carter for Oclaro. (See Get Carter: Oclaro Did, From Cisco.)

Before Cisco, Gartner's career stretches back through COO stints at three optical startups -- Photuris, Mahi Networks and Meriton (all eventually acquired) -- to a run as VP/GM of Lucent's optical group before the Alcatel-Lucent merger. So, like Cisco, he's no stranger to optical, or service provider networks.

— Dan O'Shea, Managing Editor, Light Reading

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rgrutza600
rgrutza600
4/9/2015 | 2:24:34 AM
Infinera Announces Offer to Acquire Transmode
Wow!

Acquisition Accelerates Metro Packet-Optical Strategy and Establishes End-to-End Portfolio

SUNNYVALE, CA and STOCKHOLM, SWEDEN
-- (Marketwired - Apr 9, 2015) - Infinera (NASDAQ: INFN)
  • Complementary product offering of long-haul, metro and Cloud that addresses the breadth of the DWDM market -- forecast to reach $15B in 20191
  • Aligns Infinera's #1 position in 100G WDM (ex-China) with Transmode's #1 position in metro packet optical in EMEA
  • Timing enables combined company to capitalize on increased expected spending on transport within metro infrastructures
  • Expected to be accretive to non-GAAP EPS in 2016



Infinera (NASDAQ: INFN), announced its offer to acquire Transmode, a leader in metro packet-optical networking through a recommended public offer to the shareholders of Transmode (the "Offer"). Transmode is headquartered in Stockholm, Sweden, and listed on Nasdaq Stockholm (TRMO).

The Board of Directors of Transmode has unanimously recommended to Transmode's shareholders to accept the Offer. Pod Investment AB, the largest shareholder, which holds approximately 33 percent of the total shares and voting rights in Transmode, has undertaken to accept the Offer subject to customary conditions.

Complementing Infinera's strength in the long-haul optical transport market and its early lead in the metro Cloud market, Transmode's suite of metro core, edge and access solutions will allow Infinera to address the entire end-to-end WDM market and to capitalize on the transition of major 100G metro aggregation deployments expected by industry analysts to commence in 2016. Transmode's products provide a rich set of application specific features including broadband aggregation, mobile backhaul and fronthaul along with business Ethernet MEF certifications. Both companies bring complementary customers and technology with Transmode positioned primarily in metro applications in Europe and Infinera historically positioned in long-haul and metro cloud, particularly in North America.

"The acquisition of Transmode accelerates the realization of our long held vision of providing an end-to-end portfolio of world class optical transport products. Further, the combination ensures we are well positioned to be a leading provider in the metro aggregation market as this market transitions to 100G," said Tom Fallon, CEO of Infinera. "Transmode's services-rich metro platforms, broad European customer base and profitable business model are naturally complementary to Infinera. We are also excited to have the Transmode team join Infinera and leverage our shared cultures of customer first, product excellence and profitability."


"Drawing on the complementary and synergistic skill sets of Infinera and Transmode, the combined company will be able to compete more effectively, develop differentiated and advanced products, and provide greater value to its most important stakeholders -- customers, investors and employees," said Karl Thedéen, CEO of Transmode.

Under the terms of the Offer, for every 10 shares of Transmode, shareholders will receive SEK 300 in cash and 4.705 Infinera shares. The purchase price implies a price per share of approximately SEK 109, and a total equity value for Transmode of approximately $350 million. In aggregate, Infinera will deliver approximately $96 million in cash, funded from its balance sheet, and will issue approximately 13.0 million new Infinera shares to Transmode shareholders. As of December 27, 2014, Infinera's total cash holdings were approximately $391 million. Post-transaction, Transmode shareholders will own 8.7 percent of the combined company on a fully diluted basis. The acquisition has been approved by the board of directors of Infinera, and unanimously recommended by the board of directors of Transmode.

The Offer is expected to close in the third quarter of Infinera's fiscal year 2015, subject to certain closing conditions, including acceptance by more than 90 percent of the total number of shares of Transmode and other customary conditions. The transaction is expected to be neutral to slightly dilutive to Infinera's non-GAAP earnings in the second half of 2015, and accretive to Infinera's non-GAAP earnings in 2016.
rauf.sulya
rauf.sulya
4/8/2015 | 12:49:30 AM
Re: what is...Need not surprise
No need to wonder why Verizon choosen Cisco for Metro 100G. I would say that, this provides edge to Cisco as Optical Vendor apart from being global leader in Ethernet/IP Devices. 

 

Very soon, Facebook will annouce their own equipment...
brooks7
brooks7
4/7/2015 | 7:26:46 PM
Re: what is...
tojofay,

Before it was called Vendor Financing, it was called Leasing.  

seven

 
tojofay
tojofay
4/7/2015 | 4:40:36 PM
what is...
"Price was one of the factors, but not the only factor," he said. "We invested a lot in trying to find out what problems they faced, and didn't just try to sell them a box."

 

vendor financing? 

DEFINITION of 'Vendor Financing'


The lending of money by a company to one of its customers so that the customer can buy products from it. By doing this, the company increases its sales even though it is basically buying its own products.






 
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